Disability insurance is coverage purchased to provide a working person with payments to replace salary or wages lost during a period of disability. If a person should lose their income because they cannot work during a period of disability, a disability insurance policy pays a certain amount to the employee weekly or monthly to replace their lost salary or wages.
Disability insurance policies commonly define disability insurance in one of two ways:
- General-Disability Insurance: A policy of general disability insurance provides benefits to a person who cannot perform any job for which the person is qualified because of sickness or injury. As long as the policyholder can still perform some job for which they are qualified, they cannot claim disability benefits under their general disability insurance policy;
- Occupational-Disability Insurance: An occupational-disability insurance policy pays disability benefits to a person who cannot perform their regular job because of sickness or injury. They can claim their policy benefits even if they could perform some different job.
This distinction can be critically important. For example, if a surgeon loses a hand, they probably are no longer able to perform surgery. If the surgeon has an “occupational-disability” policy, they would be able to claim their disability benefit, even though they could still work as a doctor in a non-surgical field.
If the surgeon has a “general-disability” policy, they would not be able to claim their disability benefit, because the surgeon can still work at something other than surgery. So, even if the surgeon’s only alternative employment option is something completely unrelated to performing surgery, they would have to work at that alternative employment and could not claim a disability benefit.
How Much Income Will My Policy Pay While I Am Disabled?
An insurance pay out may be stated as a percentage of the person’s income or as a set dollar amount. A person’s specific policy defines how much they will be paid. It also states how long after they become disabled they must wait for their payments to begin, and when they will stop. The period of time for which benefits are paid may depend on whether the disability was caused by an accident or illness.
Generally, the longer the benefit period, the more the policy costs. Injuries or sickness as a result of a person’s employment may also be covered by their state’s worker’s compensation program.
What Types of Disability Insurance Policies Are There?
Generally, there are three major types of long-term disability policies:
- Policies That Cannot Be Canceled: The premiums for this type of policy are fixed over the term of the policy. The insurer cannot suddenly increase the premiums, decrease the value of the benefits, or cancel the policy. It is also possible to purchase a policy that the insurance company cannot refuse to renew, however the premiums can go up for a policy that is guaranteed to be renewable;
- Guaranteed Renewable Policies: The premiums for a policy for which renewal is guaranteed can be raised as long as the change affects numerous policyholders, and not just one of them;
- Conditionally Renewable Policies: The premiums for a conditionally renewable policy can increase and a person’s coverage can be canceled in the event certain conditions stated in the policy are triggered. An insurance company may raise premiums or cancel a person’s coverage if it believes that the risk of insuring the person has gone up. There is a risk of losing coverage when a person most needs it and at a time when they may be unable to qualify for a new policy.
Other features of disability policies are important for policyholders. As with any insurance, disability insurance policies cost more if their terms and conditions offer a greater benefit to the insured person. Plans with less generous terms come with less costly premiums. Some of the features of a disability insurance policy that have an impact on insurance premiums include the length of the elimination period, which is the length of time that the policyholder must wait after becoming disabled before they start to receive the benefits.
Another feature is the period of time for which the disability benefit is paid. Another significant feature is how strict the definition of “disability” is under the policy. Some policies might define a disability in a very limited way, so that qualifying is difficult. Other policies may define disability in a way that makes it more likely that person would qualify for the benefits.
If a policy offers a short elimination period, a lengthy benefit period and a generous definition of “disability,” it will be more expensive. If a policy has a long elimination period, a short benefit period and a narrow definition of “disability,” it is likely to cost less.
How Can I Obtain Disability Insurance?
There are many different kinds of disability benefit insurance contracts. Some plans are available to employees from an employer through the employer’s group health package. Other policies may be offered by a private company that is recommended by the employer or the
employees’ union. Of course, a person can always shop on their own for a disability insurance policy, maybe working with an insurance agent or broker.
The federal government also provides disability insurance through two programs; one is the Social Security Disability Insurance (SSDI) and the other is the Social Security Income (SSI) program.
A person has to qualify for the SSDI program by accumulating enough credits in their employment history to qualify to receive monthly disability payments. Specifically, applicants for SSDI must have paid Social Security taxes on their wages or salary long enough to qualify for SSDI benefits. So, applicants for SSDI must have a history of steady work and payment of Social Security taxes.
The work credit requirements may be lower for people under the age of 22, and they are allowed to use their parents’ work credits for their applications. SSDI is paid for by taxpayers when they pay their Social Security taxes.
People who are eligible to be awarded SSI include those who meet one of the following criteria:
- The person is 65 years or older;
- The person is blind with a central visual acuity for distance of 20/200 or less in their better eye with use of a correcting lens;
- The person is disabled.
There are other criteria including having a limited income and resources. To qualify as disabled for the purposes of qualifying for SSI, the Social Security Administration (SSA) publishes a “Blue Book.” This book contains medical listings that detail the criteria for qualifying for disability benefits as a result of a disability. If a person’s disability matches one of these medical listings and the criteria in that listing, they will probably qualify for SSI disability benefits. On the other hand, if a person’s condition is not included in the Blue Book, the person has to prove that their disability results in a complete inability to work due to the limitations created by the disability.
Some states also have state disability insurance programs that provide disability benefits in the event a worker becomes disabled. Veterans of the armed forces, federal civil servants and coal miners are also covered by federally-sponsored programs.
Note that state disability insurance programs may differ widely from state to state. For instance, California’s disability insurance program may be much different from the disability program in Florida or other states.
Do I Need an Attorney to Help with My Disability Insurance Case?
The legal issues involved in any kind of disability insurance can become complicated and technical. Also, insurance companies defend their rejections of claims vigorously.
Therefore working people should consult an insurance attorney experienced in insurance claims and insurance bad faith litigation to evaluate potential legal claims. Do not be deterred by fear of what a lawyer might charge to represent you. It is possible that a lawyer might take an insurance disability case on a contingency fee basis. First, however, an attorney will investigate and evaluate your case and advise you as to the best way forward.
If you have a claim for SSDI or SSI, there are attorneys who are experienced in SSDI and SSI claims, as well as attorneys who handle workers compensation cases. If you need to apply for SSDI, SSI or workers compensation, you should consult one of these attorneys.
